Federal Signal Corporation · NYSE:FSS
Federal Signal — Q2 2020 Earnings Presentation
34 slides from Federal Signal's earnings presentation, August 2020
Slide 1: Disciplined Growth
Disciplined Growth Investor Presentation August 2020
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains unaudited financial information and forward-looking statements. Statements that are not historical are forward-looking statements and may contain words such as “may”, “will” ,“believe”, “expect”, “anticipate”, “intend”, “plan”, “project”, “estimate”,
Slide 3: Federal Signal at a Glance
Federal Signal at a Glance • Founded in 1901, joined NYSE in 1969 (“FSS”) • Diversified industrial manufacturer of specialized vehicles for maintenance and infrastructure markets such as street sweepers, sewer cleaners, vacuum/hydro-excavators (“safe- digging trucks”), industrial vacuum loaders, wat
Slide 4: An Experienced Leadership Team
An Experienced Leadership Team Jennifer Sherman Mark D. Weber President and Chief Executive Officer Senior Vice President and Chief Operating Officer Appointed January, 2016 Appointed January, 2018 Previously Chief Operating Officer, Chief Administrative Previously served as President and Ch
Slide 5: Positioned for Long-Term Growth
Positioned for Long-Term Growth With continued focus on organic growth and M&A, and margin performance above that of many of our peers, our financial framework aims to create long-term shareholder value Long-Term Organic Value-Added Revenue Growth Acquisitions (Couple of % points > GDP) High Single
Slide 6: Two Attractive Platforms
Two Attractive Platforms Environmental Solutions Safety and Security Systems Segment $953 M* Group Group (ESG) (SSG) Serves publicly-funded, Serves the needs of industrial, and utility markets for municipalities and industrial Markets surface and sub-surface verticals for audible and cleaning, safe-
Slide 7: Environmental Solutions Group (ESG)
Environmental Solutions Group (ESG) Have established a platform serving maintenance and infrastructure markets to provide customers with a comprehensive suite of products and services Street Sewer Safe Industrial Materials Hauling Road Application sweeping cleaning digging cleaning Marking Brands Pr
Slide 8: Safety and Security Systems Group (SSG)
Safety and Security Systems Group (SSG) Serves the needs of government and industrial verticals for audible and visual safety and security notification devices Public Safety and Security Signaling Systems Lights and siren products for Police, Fire and Audible and visual Warning Systems Application H
Slide 9: Key Strategic Initiatives
Key Strategic Initiatives Specialty Vehicles for Areas of Aftermarket Parts and Audible and Visual Focus Safe Digging Diverse Services Warning Devices End-Markets Supported By Flexible New Product Technology as an Manufacturing & “ETI” Disciplined M&A Development Enabler Culture 9
Slide 10: Strategic Initiative– Safe Digging
Strategic Initiative– Safe Digging Federal Signal is well positioned to establish a leading position in an emerging application for vacuum-excavation technology; increased regulation expected to accelerate growth What is it? Why is it Attractive? Why Federal Signal? • Vacuum excavation or “Safe Digg
Slide 11: Strategic Initiative– Aftermarket Parts & Services
Strategic Initiative– Aftermarket Parts & Services Optimizing platform to transform Federal Signal’s aftermarket business into an industry leader of parts and services to maintenance and infrastructure markets • Unified platform to serve customers across all ESG Rentals businesses Strategic Objectiv
Slide 12: Strategic Initiative– Audible & Visual Warning Devices
Strategic Initiative– Audible & Visual Warning Devices SSG businesses focused on optimizing their existing channels and expanding product offerings Optimize Channel Product Portfolio Expansion Smart Products • Pricing / Promotion strategy • “Allegiant” – low cost lightbar to • CommanderOne – monetiz
Slide 13: Reclaiming Tomorrow, Together
Reclaiming Tomorrow, Together • Recently launched Reclaiming Tomorrow, Together initiative, which targets growth strategies during the various phases of the pandemic, in four primary areas: Improving digital customer experience Focusing NPD efforts on ways to make our products and the way we con
Slide 14: Federal Signal Today vs. Prior Downturns
Federal Signal Today vs. Prior Downturns Today Prior Downturns Composition of Businesses • Clearly-defined strategy, with two groups – ESG and SSG – each of which have • Composition of our current groups, in addition to low- strong growth potential through a combination of organic initiatives and M&
Slide 15: Profitable Growth Execution
Profitable Growth Execution Net Sales Adjusted EBITDA Margin* Q2 2020 Highlights2: (Consolidated) • Impressive operational performance, 1,221 1,179 despite exceptionally difficult 1,090 228 15.4% 15.7% 15.9% 226 14.6% circumstances Adjusted EBITDA $ in millions 899 226 12.0% 12.4% 768 Margin % 708 2
Slide 16: Strong Financial Position Supports Priority-Driven Long-Term Capital Allocation
Strong Financial Position Supports Priority-Driven Long-Term Capital Allocation In July 2019, executed five-year, $500 M revolving credit facility, with flexibility to increase by additional $250 M for acquisitions; No debt maturities until July 2024; net debt leverage at end of Q2 2020 remains low,
Slide 17: Reinstating 2020 Guidance
Reinstating 2020 Guidance Adjusted EPS* for 2020 expected to be in a range of $1.53 to $1.65 Key Assumptions No significant COVID-related disruptions for the duration Interest rate of ~3% of the year Full-year effective income tax rate of ~25% Depreciation and amortization expense to increas
Slide 18: Appendix
Appendix I. Segments Overview II. Eighty-Twenty Improvement Culture III. New Product Development IV. Disciplined M&A Process V. Non-GAAP Measures VI. Executive Compensation VII. Investor Information 18
Slide 19: I: ESG Products
Appendix I: ESG Products VACTOR OW TRUVAC Jetstream, a OS WESTECH a. M¢Solutions {Depot
Slide 20: I: ESG Products (continued)
Appendix I: ESG Products (continued) 20
Slide 21: I: ESG - Market Influencers & Where We Play
Appendix I: ESG - Market Influencers & Where We Play Market Dynamics Many ESG products support essential services that are 2019 Sales by Geography focused on cleaning Aging infrastructure, pipeline expansion and increasing 18% urbanization support long-term demand for safe digging products, dump
Slide 22: I: SSG Products
Appendix I: SSG Products FEDERAL SIGNAL Safety and Security Systems Public Safety Systems FEDERAL SIGNAL Safety and Security Systems Heavy Duty FEDERAL SIGNAL Safety and Security Systems Signaling FEDERAL SIGNAL Safety and Security Systems Systems FEDERAL SIGNAL VAMA Safety and Security Systems
Slide 23: I: SSG - Market Influencers & Where We Play
Appendix I: SSG - Market Influencers & Where We Play Market Dynamics 2019 Sales by Geography Increased national focus on issues of public safety and law enforcement, and rising public expectations for transparency and accountability driving demand for safety and security products 37% 63% Rising
Slide 24: II: Eighty–Twenty Improvement ("ETI") Culture
Appendix II: Eighty–Twenty Improvement (“ETI”) Culture Manufacturing Efficiency Material Cost Reduction • Lean manufacturing focus • Waste reduction • Throughput flexibility • SKU rationalization • Labor pool management • Savings through volume aggregation • Flexible manufacturing model • Sourcing o
Slide 25: III: New Product Development
Appendix III: New Product Development Customer-Focused Process • Complete change in approach to innovation, starting in 2013 • Current innovation organization has had a number of successes, including the record- breaking launch of the ParaDIGm vacuum excavator • Most successful new product launch in
Slide 26: IV: Disciplined M&A
Appendix IV: Disciplined M&A Target companies that accelerate our current strategic initiatives or provide a platform for growth in adjacent markets or new geographies • Niche market leader (product, geography, end-market) Characteristics • Sustainable competitive advantage Business • Deep domain ex
Slide 27: V: Non-GAAP Measures
Appendix V: Non-GAAP Measures • Impact of 2019 Lease Accounting Standard Adoption on historical non-GAAP measures - Effective January 1, 2019, the Company adopted the new lease accounting standard, which resulted in a change to the Company’s recognition of the deferred gain associated with historica
Slide 28: V: Adjusted Earnings Per Share
Appendix V: Adjusted Earnings Per Share Three Months Ended June 30, ($ in millions, except EPS) 2020 2019 Net income $ 21.4 $ 32.8 Add: Income tax expense 6.1 11.6 Income before income taxes 27.5 44.4 Add: Acquisition and integration-related expenses 0.3 0.9 Pension-related charges (1) 2.5 - Restruc
Slide 29: V: Adjusted Earnings Per Share (cont.)
Appendix V: Adjusted Earnings Per Share (cont.) Year Ended December 31, (1) Purchase accounting effects relate to adjustments to exclude the step-up in the valuation of equipment acquired in connection with recent acquisitions that was sold ($ in millions, except EPS) 2016 2017 2018 2019 subsequent
Slide 30: V: Adjusted EBITDA
Appendix V: Adjusted EBITDA $ millions, except % Q2 2020 Q2 2019 Net income $ 21.4 $ 32.8 Add: Interest expense 1.8 2.0 Acquisition and integration-related expenses 0.3 0.9 Restructuring 1.3 - Coronavirus-related expenses 1.4 - Purchase accounting effects * 0.0 0.1 Other expense (income), net 2.0 (0
Slide 31: V: Adjusted EBITDA (cont.)
Appendix V: Adjusted EBITDA (cont.) (a) Coronavirus-related expenses in the trailing twelve ($ in millions) 2015 2016 2017 2018 2019 TTM 6/30/20 months ended June 30, 2020 relate to direct expenses Net Sales $ 768.0 $ 707.9 $ 898.5 $ 1,089.5 $ 1,221.3 $ 1,179.4 incurred in connection with the Compan
Slide 32: VI: Executive Compensation Aligned with Long-term Objectives
Appendix VI: Executive Compensation Aligned with Long-term Objectives • The Company continues to focus on executing against a number of key long-term objectives, which include the following: Creating disciplined growth Improving manufacturing efficiencies and costs Leveraging invested capital
Slide 33: VII: Investor Information
Appendix VII: Investor Information Stock Ticker: NYSE:FSS Company website: federalsignal.com/investors HEADQUARTERS 1415 West 22nd Street, Suite 1100 Oak Brook, IL 60523 INVESTOR RELATIONS CONTACTS 630-954-2000 Ian Hudson Svetlana Vinokur SVP & Chief Financial Officer VP, Treasurer and Corporate Dev
Slide 34: Federal Signal Moves. Cleans. Protects.
[z FEDERAL SIGNAL Moves. Cleans. Protects.